U.S. stocks rallied and Treasuries fell after housing starts and earnings from Coca-Cola Co. and Johnson & Johnson beat estimates, while gold rebounded from its biggest slump in three decades. European stocks fell while the yen and dollar weakened.
The Standard & Poor’s 500 Index gained 1.4% at 4 p.m. in New York, posting its second-best gain of the year and rebounding from the biggest drop in five months. The Stoxx Europe 600 Index fell 0.8%. Japan’s currency dropped against all 16 major counterparts, while the dollar weakened against 14. Treasury 10-year note yields climbed five basis points to 1.73%, the first increase in four days. Gold futures added 1.9% and palladium and platinum climbed more than 3.5%.
Gold recovered from a two-year low after the biggest selloff since 1980 as investors including BlackRock Inc.’s Catherine Raw and Sri Lankan central bank Governor Ajith Nivard Cabraal said the decline led to a buying opportunity. Coca-Cola reported higher sales volumes in Latin America, while new drugs helped J&J beat projections. U.S. housing starts jumped as multifamily projects rose to the highest level in more than seven years, while cheaper gasoline led to a drop in consumer prices.
“The outlook for gold for us is really positive in the long term,” Raw, a fund manager in London at BlackRock, which oversees about $3.8 trillion globally, said in an interview today on Bloomberg Television with Francine Lacqua. “The probability of inflation over the next five years is higher not lower than it was last year. Other things such as cash losing money, the Cyprus event, savings being targeted means people are looking for alternatives.”
Stocks rebounded even after the International Monetary Fund trimmed its global growth forecast and urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world.
The global economy will expand 3.3% this year, less than the 3.5% forecast in January, after 3.2% growth in 2012, the IMF said today, cutting its prediction for this year a fourth consecutive time. The IMF sees the 17-country euro area shrinking 0.3%, compared with a 0.2% retreat in January, with France joining Spain and Italy in contracting.